I'm an expert on business growth and overcoming organizational obstacles to success. I do keynote speaking at conferences and management meetings, and a workshop leader for companies wanting to find their next growth engine. Author of "Create Marketplace Disruption: How to Stay Ahead of the Competition" (Financial Times Press), a contributing editor for "International Journal of Innovation Science" and a leadership columnist for CIOMagazine and ComputerWorld. Currently serve as Audit Chair for 6D Global, and am CEO of Soparfilm Energy E&P company as well as Content Laboratory, a communications services company and coms software provider. Former head of business development for Pepsico and Dupont, consultant with The Boston Consulting Group. Harvard MBA. Live in Chicago.

Microsoft Still Can't Find Its Future. Is It Too Late for the Company?

Microsoft needed a great Christmas season. After years of product stagnation, and a big market shift toward mobile devices from PCs, Microsoft’s future relied on the company seeing customers demonstrate they were ready to jump in heavily for Windows8 products – including the new Surface tablet.

Looking deeper, for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to mobile device penetration, a market where Surface and Win8 phones have failed to make a significant impact or move beyond a tiny market share. Users increasingly see the complexity of shifting to Win8 as not worth the effort; and if a switch is to be made, consumer and businesses now favor iOS and Android.

Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums in its on-line division (negative $350M-$750M/quarter). No matter how much anyone likes the non-Windows Microsoft products, without the historical Windows/Office sales and profits, it’s hard to see how long Microsoft can remain sustainable.

What can we expect next at Microsoft?

Ballmer appears to have committed to fight to the death in his effort to defend & extend Windows. So expect death as resources are poured into the unwinnable battle to convert users from iOS and Android.

As resources are poured out of the company in the Quixotic effort to prolong Windows/Office, dividends should steadily diminish.

Expect substantial layoffs over the next 3 years. They could even reach 50-60%, or more, of employees.

Expect closure of the long-suffering on-line division in order to conserve resources.

The entertainment division could be spun off, sold to someone like Sony or possibly Barnes & Noble, or dramatically reduced in size. Unable to make a profit it will increasingly be seen as a distraction to the battle for saving Windows, and Microsoft leadership has long shown it doesn’t know how to profitably grow this business unit.

As more and more of the market shifts to competitive cloud infrastructure Apple, Amazon, Samsung and others will grow significantly. Microsoft, losing its user base, will demonstrate its inability to build a new business in the cloud, mimicking its historical failures with Zune (mobile music) and Microsoft mobile phones. Microsoft server and tool sales will suffer, creating a much more difficult profit environment for the sole remaining profitable division.

Missing the market shift to mobile has already forever tarnished the Microsoft brand.

No longer is Microsoft seen as a leader. Instead it is rapidly losing market relevancy as people look to Apple, Google, Amazon, Samsung, Facebook and others for leadership. The declining sales and lack of customer interest could lead to a tailspin at Microsoft not unlike what happened to RIM. Cash will be burned in the struggle to save what Microsoft sees as the core of the company.

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swd1974 – would you like to make this argument – just as you made it – to your CEO and Chief Marketing Officer and COO when they tell you they want to use their iPhone and/or iPad and don’t want to carry another device – including a PC?

I don’t have to make this argument. Enterprises make it everyday. The most they typically allow a BYOD device for is Outlook (office heh) to retrieve email. If I were a writer, which I am not and have the utmost respect for those that do as I am not literary or able to use words in a useful manner in print, I would write an article on the death of VMware. Windows Server 2012 is the greatest piece of released software perhaps ever. And that’s not even including the terrific Hyper-V 3 which is now an enterprise grade hypervisor that is free (included in WS 2012).

Most people run VMware on Windows Server so it is an easy move to make. Especially in an environment where cutting costs reigns supreme. Your article was well written with a ton of true facts but misses the most vital component. Common Sense. Look at Hyper-V, SQL Server, O365, and Azure for proof that while MS is not always on the cutting edge it makes up ground fast and is never “out” of a market. Watch India and China for Windows Phone success. Keep an eye out for Surface pro and look at its success in the enterprise world not the consumer. Keep your eye on Bing gaining ground on Google year after year. And watch the revenues of XBOX rise YOY as well with subscription based content.

I just wish MS would have gotten the rights to the NFL from DirectTV. With MLS, NHL etc on the XBOX the NFL would have been a tremendous move.

The problem is that Microsoft does not make enough money on the server products to keep the company moving forward swd1974. It depends upon the revenue and profits from growing PC sales. When that starts to decline the revenue/profit model at Microsoft falls apart – regardless of how well people like the other products.

xBox and Kinect are GREAT products David Oliver. It’s just that they don’t make any money. And Microsoft, after 10 years, has not shown it has any clue how to make money in the entertainment division. Certainly not enough to replace declining Windows profits. Now – your claim that Sony doesn’t have the money to buy anything is probably true. But investment bankers seem able to fund almost any big company to big company transaction.

Quote from today’s ZD Net article regarding Dell investment – “For all the talk about Microsoft’s Windows 8 issues, the company’s enterprise business is humming. ” Adam – any comments you made in the article you want to pull back?

Buy all the Dell stock you want. You can write it off along with your Microsoft and HP holdings soon enough. The market is in transition – it has not fully transitioned. Yes there are people buying PCs. But the trends, and volumes, are shifting in an alternative direction. You can choose to read the telltales, or sail into the hurricane unprepared.

Clearly the author has never heard of Enterprise. MSFT dominates the Enterprise space, and will continue to do so – Apple doesn’t even come vaguely close.Maybe MSFT gets it’s butt handed to itself in the normal consumer space, but hundreds of millions of people use MSFT products at work every single day, and won’t be stopping any time soon.

When Surface Pro is released, it will take a nice bite out of out the market share. It won’t be for casual use, but for business tablet capabilities. Sorry, iPad isn’t gonna be adopted by companies nearly as much in this capacity.

Windows Phone – yea, I can’t see that ever being a truly competitive force until devs start working on Win8 apps. That one I’ll give you.

Win8 – I have a theory about MSFT OS’s – they seem to always release a dud before they unveil something that sticks. Not sure if there’s a Win9 on the way, but you can bet if there is one, it’ll take all the best parts of 7 & 8, lose all the bad parts, and wind up being kind of awesome (which is what I feel Win7 did after Vista, etc.)

I have also been hearing that MSFT is sounding it’s death knell for YEARS…and yet they still exist, innovate, and now are quite rapidly adopting Cloud and fast iteration cycles for software/products. Sure, things lok a little crazy right now, but the next few years (I’m betting) will prove to the contrary.